Sirius XM Radio Bears Out

The exchanges provided the market with fresh data on short interest yesterday afternoon, and apparently a lot of people are betting against Sirius XM Radio (NASDAQ: SIRI) . The satellite radio provider closed out the month of March with 242.2 million shares sold short.

That's a big number, but to put it in its proper perspective, we're looking at the largest number of shares sold short of the media giant since the end of last year. That may not seem like such a big deal, but let's catch up with Sirius XM's short interest over the past few months.

Date

Short Interest

Dec. 31, 2013

267.7 million

Jan. 15, 2014

221.6 million

Jan. 31, 2014

218.8 million

Feb. 14, 2014

184.8 million

Feb. 28, 2014

186.3 million

March 14, 2014

224.2 million

March 31, 2014

242.2 million

Source: Nasdaq.

It may not be fair to limit our look back to the end of last year. Short interest was actually much higher than the current 242.2 million shares through 2013, peaking above 400 million 14 months ago. However, it's still important to notice that the number of bearish wagers placed here has increased for three consecutive reporting periods. Since bottoming out on Valentine's Day, we've seen Sirius XM's naysayers climb by 45%.

This probably isn't a surprise considering what happened last month. Liberty Media (NASDAQ: LMCA) -- John Malone's eclectic media empire with a controlling stake in Sirius XM -- abandoned plans to acquire the entire company. It didn't seem like such a big deal at the time. Liberty Media wasn't offering much of a premium, and it wouldn't even have been a cash offer. Malone would have simply lumped in Sirius XM with a bunch of slower-growing assets that wouldn't have been as attractive to stand-alone investors.

However, eliminating a near-term buyout was also probably a dinner bell for the bears. There was no longer a floor to worry about restricted to Liberty Media's less volatile stock. Sirius XM's stock initially spiked on the news, generating its heaviest trading volume on March 14 since the day the proposed transaction was initially announced two months earlier. However, shares of Sirius XM have gone on to shed nearly 10% of their value in that time. One can point to many factors for the slide, but the contributor has to be the market rotating out of growth stocks in recent weeks. By that metric, Sirius XM investors should consider themselves fortunate to not have suffered the 25% to 30% corrections that many of the tech darlings have suffered since peaking in early March.

Folks who are long Sirius XM don't necessarily have to fret the uptick in shorts. Bearish considerations in putting actual money on the line betting on a stock's decline can't be dismissed, but it's ultimately more upside when positive catalysts trigger a short squeeze.

There are positive catalysts to be had out there. Sirius XM could pre-announce a strong first quarter subscribers in the coming days. Liberty Media can make another play to acquire the balance of Sirius XM on sweeter terms. Things can naturally go the other way, but now that Sirius XM is a thriving enterprise throwing off gobs of free cash flow, it's hard to fathom it slipping too much lower. Liberty Media removed one floor, but it's not the only floor.

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There may be a lot of blood shed after sirius announces its Q1 results. The only number may not be impressive is the net subs. The self pay subs will be on track to annual 1.5M or more.

There may be a very strong Q that may very well make the shorts run as fast as ever. I remain cautiously optimistic about the stock bounce back because nothing in terms of fundamentals has changed for the worse. On the contrary, this is going to be the "cleanest" Q siri has ever had with low interest payments, no refinance costs and virtually no sat launch and build costs. I expect the financials to be extremely strong.